The XBRL Taxonomy Gap: Foreign Private Issuers using IFRS

Are you a Foreign Private Issuer using IFRS as issued by the IASB? If so, then you will implement XBRL in 2011 right? Not so fast…

Over the last two years the larger SEC filers have implemented XBRL into their quarterly SEC reporting process. In 2011 Tier 1 companies (Note 1) will lose the XBRL liability limitation that existed during implementation. 2011 will also see Tier 2 companies (Note 1) implement detail footnote tagging and Tier 3 companies (Note 1) implement XBRL for the first time.

One big open item in the 2011 XBRL agenda is the IFRS Taxonomy. The SEC’s XBRL rule requires all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB to file the XBRL exhibit to their SEC filings beginning with quarters ended after June 15, 2011. To do so, these filers would be required to use a taxonomy that is approved by the SEC (approved taxonomies are listed on the SEC’s website). The problem is that there is not an approved IFRS taxonomy listed on the SEC’s website.

The bottom line for foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB is that they will be required to file XBRL as part of their 20-F or 40-F filings, however they will be unable to file XBRL because there is not an approved IFRS taxonomy. An investigation of this issue with the SEC confirmed this understanding as true. There is a 2011 IFRS taxonomy that is exposed for comment until March 18, 2011. Hopefully the SEC will consider approving the new 2011 IFRS Taxonomy or will issue additional guidance clarifying expectations for foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB.

Stay tuned for further developments.

Note 1: Tier 1 companies are domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public common equity float above $5 billion, Tier 2 companies are all other domestic and foreign large accelerated filers using U.S. GAAP and Tier 3 companies are all remaining filers using U.S. GAAP, including smaller reporting companies, and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB.